119-s2461

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2461 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 2461

 To amend the Internal Revenue Code of 1986 and the Small Business Act 
 to expand the availability of employee stock ownership plans in S 
 corporations, and for other purposes.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 July 24, 2025

 Mr. Daines (for himself, Ms. Hassan, Mrs. Blackburn, Ms. Smith, Mr. 
 Grassley, Mr. Van Hollen, Mr. Tillis, Mr. Sanders, Mr. Young, Mr. 
Welch, Mr. Risch, Ms. Hirono, Ms. Cantwell, and Mr. Husted) introduced 
the following bill; which was read twice and referred to the Committee 
 on Finance

_______________________________________________________________________

 A BILL

 To amend the Internal Revenue Code of 1986 and the Small Business Act 
 to expand the availability of employee stock ownership plans in S 
 corporations, and for other purposes.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``Promotion and Expansion of Private 
Employee Ownership Act of 2025''.

SEC. 2. FINDINGS.

 Congress finds that--

    (1) on January 1, 1998--nearly 25 years after the Employee 
 Retirement Income Security Act of 1974 was enacted and the 
 employee stock ownership plan (hereafter in this section 
 referred to as an ``ESOP'') was created--employees were first 
 permitted to be owners of subchapter S corporations pursuant to 
 the Small Business Job Protection Act of 1996 (Public Law 104-
 188);

    (2) with the passage of the Taxpayer Relief Act of 1997 
 (Public Law 105-34), Congress designed incentives to encourage 
 businesses to become ESOP-owned S corporations;

    (3) since that time, several thousand companies have become 
 ESOP-owned S corporations, creating an ownership interest for 
 several million Americans in companies in every State in the 
 country, in industries ranging from heavy manufacturing to 
 construction to services;

    (4) while estimates show that 40 percent of working 
 Americans have no formal retirement account at all, every 
 United States worker who is an employee-owner of an S 
 corporation company through an ESOP has a valuable qualified 
 retirement savings account;

    (5) recent studies have shown that employees of ESOP-owned 
 S corporations enjoy greater job stability than employees of 
 comparable companies;

    (6) studies also show that employee-owners of S corporation 
 ESOP companies have amassed meaningful retirement savings 
 through their S ESOP accounts that will give them the means to 
 retire with dignity;

    (7) under the Small Business Act (15 U.S.C. 631 et seq.) 
 and the regulations promulgated by the Administrator of the 
 Small Business Administration, a small business concern that 
 was eligible under the Small Business Act for the numerous 
 preferences of the Act is denied treatment as a small business 
 concern after an ESOP acquires more than 49 percent of the 
 business, even if the number of employees, the revenue of the 
 small business concern, and the racial, gender, or other 
 criteria used under the Act to determine whether the small 
 business concern is eligible for benefits under the Act remain 
 the same, solely because of the acquisition by the ESOP; and

    (8) it is the goal of Congress to both preserve and foster 
 employee ownership of S corporations through ESOPs.

SEC. 3. FULL DEFERRAL OF TAX FOR CERTAIN SALES OF EMPLOYER STOCK TO 
 EMPLOYEE STOCK OWNERSHIP PLAN SPONSORED BY S CORPORATION.

    (a) Acceleration of Deferral.--

Section 114
            (c) of the SECURE 2.0 Act 
of 2022 is amended by striking ``December 31, 2027'' and inserting 
``the date of the enactment of the Promotion and Expansion of Private 
Employee Ownership Act of 2025''.

    (b) Repeal of Limitation.--

    (1) In general.--

Section 1042 of the Internal Revenue Code 
 of 1986, as amended by 

section 114 of the SECURE 2.0 Act of 
 2022, is amended by striking subsection

    (h) .

    (2) Effective date.--The amendment made by paragraph

    (1) shall apply to sales after the date of the enactment of this 
 Act.

SEC. 4. DEPARTMENT OF THE TREASURY TECHNICAL ASSISTANCE OFFICE.

    (a) Establishment Required.--Before the end of the 90-day period 
beginning on the date of enactment of this Act, the Secretary of the 
Treasury shall establish the S Corporation Employee Ownership 
Assistance Office to foster increased employee ownership of S 
corporations.

    (b) Duties of the Office.--The S Corporation Employee Ownership 
Assistance Office shall provide--

    (1) education and outreach to inform companies and 
 individuals about the possibilities and benefits of employee 
 ownership of S corporations; and

    (2) technical assistance to assist S corporations in 
 sponsoring employee stock ownership plans.

SEC. 5. SMALL BUSINESS AND EMPLOYEE STOCK OWNERSHIP.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--

    (1) by redesignating 

section 49 as 

section 50; and

    (2) by inserting after 

section 48 the following:

``

SEC. 49. EMPLOYEE STOCK OWNERSHIP PLANS.

 ``

    (a) 

=== Definitions. ===
-In this section--
 ``

    (1) the term `ESOP' means an employee stock ownership 
 plan, as defined in 

section 4975

    (e)

    (7) of the Internal Revenue 
 Code of 1986; and
 ``

    (2) the term `ESOP business concern' means a business 
 concern that was a small business concern eligible for a loan, 
 preference, or other program under this Act before the date on 
 which more than 49 percent of the business concern was acquired 
 by an ESOP.
 ``

    (b) Continued Eligibility.--In determining whether an ESOP 
business concern qualifies as a small business concern for purposes of 
a loan, preference, or other program under this Act, each ESOP 
participant shall be treated as directly owning his or her 
proportionate share of the stock in the ESOP business concern owned by 
the ESOP.''.

    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1 of the first calendar year beginning after the date 
of the enactment of this Act.

SEC. 6. ESTABLISHMENT OF THE ADVOCATE FOR EMPLOYEE OWNERSHIP.

    (a) In General.--Subtitle A of title III of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1201 et seq.) is amended by 
adding at the end the following:

``

SEC. 3005. ADVOCATE FOR EMPLOYEE OWNERSHIP.

 ``

    (a) In General.--The Secretary of Labor shall appoint an Advocate 
for Employee Ownership within the Employee Ownership Initiative 
established under 

section 346

    (b)

    (1) of the SECURE 2.0 Act of 2022 
(division T of the Consolidated Appropriations Act, 2023 (Public Law 
117-328)). The appointment shall be made without regard to the 
provisions of title 5, United States Code, relating to appointments in 
the competitive service or Senior Executive Service.
 ``

    (b) Duties.--The Advocate for Employee Ownership shall--
 ``

    (1) consult with the head of the Employee Ownership 
 Initiative established under 

section 346

    (b)

    (1) of the SECURE 
 2.0 Act of 2022 (division T of the Consolidated Appropriations 
 Act, 2023 (Public Law 117-328));
 ``

    (2) act as a liaison between the Department of Labor, 
 employee ownership advocates, employers considering employee 
 ownership, workers interested in employee ownership, and other 
 stakeholders, including employee stock ownership plan sponsors 
 and participants;
 ``

    (3) provide public education and assistance related to 
 the expansion of employee ownership through the establishment 
 and maintenance of practices that promote employee ownership, 
 including the use of employee stock ownership plans;
 ``

    (4) provide assistance for purposes of resolving a 
 dispute with the Department of Labor to any employee stock 
 ownership plan sponsor, fiduciary, or participant and help 
 facilitate communication between such entities and the 
 Department of Labor for such purposes;
 ``

    (5) in consultation with the S Corporation Employee 
 Ownership Assistance Office of the Department of the Treasury 
 established under 

section 4 of the Promotion and Expansion of 
 Private Employee Ownership Act of 2025, identify and recommend 
 potential legislative and administrative changes, including 
 related to access to capital issues, to increase practices that 
 promote employee ownership plans, including the use of employee 
 stock ownership plans; and
 ``

    (6) coordinate with other Federal agencies, including the 
 Administrator of the Small Business Administration, the 
 Secretary of the Treasury, and the Secretary of Commerce, and 
 State and local governments on outreach and education to inform 
 employees and employers about the possibilities and benefits of 
 employee ownership as a business ownership succession planning 
 option.
 ``
            (c) Consultation and Input.--The Secretary of Labor shall solicit 
advice and input from the Advocate for Employee Ownership in developing 
regulations or interpretations of this Act that relate to employee 
stock ownership plans.
 ``
            (d) Compensation.--The Advocate for Employee Ownership shall be 
entitled to compensation at the same rate as the rate of basic pay in 
effect for a position at level V of the Executive Schedule under 

section 5316 of title 5, United States Code.
 ``

    (e) Annual Report.--
 ``

    (1) In general.--Not later than December 31 of each 
 calendar year beginning after the date of enactment of this 
 section, the Advocate for Employee Ownership shall submit a 
 report to the Committee on Health, Education, Labor, and 
 Pensions of the Senate and the Committee on Education and 
 Workforce of the House of Representatives on the activities of 
 the Office of the Advocate for Employee Ownership during the 
 fiscal year ending during such calendar year, including the 
 contents described in paragraph

    (2) .
 ``

    (2) Content.--Each report submitted under paragraph

    (1) shall--
 ``
        (A) summarize the assistance requests received by 
 the Advocate for Employee Ownership during the fiscal 
 year ending during the calendar year of such report;
 ``
        (B) describe the activities, including the 
 activities described under paragraphs

    (3) and

    (4) of 
 subsection

    (b) , and evaluate the effectiveness of the 
 Advocate for Employee Ownership during such fiscal 
 year;
 ``
            (C) describe any significant problems the 
 Advocate for Employee Ownership has identified during 
 such fiscal year and ways to mitigate such problems;
 ``
            (D) contain recommendations for any 
 administrative or legislative action that may be 
 appropriate to resolve barriers to, and to incentivize, 
 practices that promote employee ownership, including 
 the use of employee stock ownership plans; and
 ``
        (E) describe progress related to employee 
 ownership in businesses in the United States.
 ``

    (3) Concurrent submission.--The Advocate for Employee 
 Ownership shall submit a copy of each report submitted under 
 paragraph

    (1) to the Secretary of Labor, and any other 
 appropriate official, at the same time such report is submitted 
 under paragraph

    (1) .
 ``

    (4) Public availability.--The Advocate for Employee 
 Ownership shall make a copy of each report submitted under 
 paragraph

    (1) available to the public.
 ``

    (5) Definition of employee stock ownership plan.--For 
 purposes of this section, the term `employee stock ownership 
 plan' has the meaning given the term in 

section 4975

    (e)

    (7) of 
 the Internal Revenue Code of 1986.
 ``

    (f) Authorization of Appropriations.--There is authorized to be 
appropriated such sums as may be necessary to carry out subsection
            (d) .''.

    (b) Clerical Amendment.--The table of contents in 

section 1 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 note) 
is amended by inserting after the item relating to 

section 3004 the 
following new item:

``

Sec. 3005. Advocate for employee ownership.''.
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